Renting my house out for first time

miss_lisalou

I am hoping to rent my house out and move in with OH. After enquiring with my mortgage company (Lloyds), I was surprised to learn that my repayments would go up from £346 to £475 per month, basically negating any monthly profit I would make. My partner wants me to carry on with this as I'll still own the house and the mortgage will still be paid. But I'm so confused about many things:
- Is it normal for mortgage companies to move their customers from a very low tracker rate to add 4.99% on simply because they're renting their house out?
- What happens when the base rate goes up, how often and how soon afterwards can I put the rent up?
- Landlord insurance - buildings and contents or just buildings cover required?

Any advice would be greatly appreciated.

ViolaLass

miss_lisalou wrote: »

I am hoping to rent my house out and move in with OH. After enquiring with my mortgage company (Lloyds), I was surprised to learn that my repayments would go up from £346 to £475 per month, basically negating any monthly profit I would make. My partner wants me to carry on with this as I'll still own the house and the mortgage will still be paid. But I'm so confused about many things:
- Is it normal for mortgage companies to move their customers from a very low tracker rate to add 4.99% on simply because they're renting their house out? Perfectly standard to charge more for this.
- What happens when the base rate goes up, how often and how soon afterwards can I put the rent up? The two are not connected. You may charge whatever rent you can persuade someone to pay.

Message too short.

Yorkie1

When you took out the mortgage, it was on a residential basis. If the property is rented out, the risks for the lender go up and they are not obliged to grant any consent to let (CTL) at all. If they do decide to do so, it is entirely on their terms and then the choice is the borrower's whether the conditions are acceptable.

CTL is usually seen as for a limited period of time - the lender will in all likelihood expect you to move onto a Buy to Let (BTL) product in due course. CTL is not designed to be a permanent solution for people who are letting out their properties and thus essentially doing it as a business (which letting out is).

OP, first read this thread for new LLs:
http://forums.moneysavingexpert.com/showpost.php?p=41160642&postcount=12

You need to find out what rental income you can expect from the property. If it doesn't really cover the existing mortgage payments then, frankly, you probably are not in a financial position to do this.

You'll see from that thread that there are other expenses, such as gas safety certificates, landlord's insurance, maintenance etc. Would you have sufficient savings to weather a void period or a tenant who stopped paying? Would you use a letting agent to manage the property? - if so then you need to deduct up to 10% of the rental income to pay for that. You will need to declare the income for tax purposes (even if you don't actually make a profit).

Letting your property out is a serious business so do your research first. There are lots of legal things you have to comply with. Don't just go ahead because your boyfriend thinks it's a good idea. I assume that neither of you have been LLs before?

kingstreet

If you are on SVR, LBG policy is to require you to switch to a Consent To Let product, usually something like a three year fix at about 5.5%, with £999 fee.

If you wish to let the property, you take this or look for a formal BTL remortgage product and see the cost difference.

We can't tell you what will happen if interest rates rise, until you tell us the full nature of the product to which the lender wishes to switch you. Fixed? Variable? Tracker? Term?

Dave_the_Ginger_Cat

If a btl/ctl is only borderline profitable now, do give serious thought to what would happen if rates rose? You don't mention your ltv, but suspect its high given Lloyds' rate.

Make your own decision here, but do think of what should happen if things worsen

somethingcorporate

If you think there is a link between what your mortgage costs and what rent you can charge perhaps being a LL is not for you.

Whilst the mortgage costs are certainly part of the decision making process in terms of identifying what "profit" you are going to make expecting to be able to up the rent without considering what the market is doing/how attractive your property is when your costs go up is incredibly naive and shows a lack of business understanding (and renting out a property is a business - and it deserves a lot of respect otherwise you will find out it can go horribly wrong for an amateur LL).

Thrugelmir

miss_lisalou wrote: »

- What happens when the base rate goes up, how often and how soon afterwards can I put the rent up?

If you've no tenants in the property. Then you'll be receiving no rent.

Suggest you understand the letting business more fully before undertaking such a venture.